Congress Tries, But Still Can't Save Payroll Tax Cuts

People who are lucky enough to have jobs could still see a cut in their paychecks next month, unless Congress votes to extend a payroll tax cut. The cut is due to expire at the end of December, and twice this week the Senate rejected measures that would have preserved the tax cut or even increased it. President Obama wants lawmakers to keep trying even if they have to work through Christmas. We're joined now by NPR's congressional correspondent, Tamara Keith. Tamara, thanks for being with us.

TAMARA KEITH, BYLINE: Glad to be here.

SIMON: And White House correspondent Scott Horsley. Thank you, Scott.

SCOTT HORSLEY, BYLINE: Good morning.

SIMON: And Tam, let's begin with you, because the Senate had two different opportunities to approve a tax cut extension this week. What happened?

KEITH: They did. There was a Democratic bill which would have extended and actually expanded the payroll tax cut, and it would have done it by raising taxes on income over a million dollars a year. That failed because they didn't get any Republican support, so they couldn't clear a filibuster. Then there was a Republican measure which would have frozen federal government worker pay and would have eliminated federal government jobs and various other things. And it turns out that didn't really have Republican support, either. It only got 20 aye votes. Most Republicans actually voted against it.

SIMON: Scott, President Obama wants an even bigger cut in the payroll tax next year and, you know, we should remind ourselves the Democrats still control the Senate. How is he trying to keep the pressure on Congress?

HORSLEY: Well, most of his pressure has really been directed at Republican lawmakers. He keeps arguing that the GOP, which is supposed to be the party of tax cuts, is more concerned with protecting tax cuts for the wealthy than it is with putting more money in the pockets of working people. That was his refrain when he was campaigning this week in Scranton, Pennsylvania, where there's a lot of working-class voters. And I think you're going to be hearing that argument from him a lot in the year to come.

Republican leaders seem to know that that looks bad for them politically, and that's why they're going to probably keep trying to find some kind of compromise here. The other thing that the administration is doing is pushing back on this idea that a tax on millionaires hurts, quote-unquote, job creators. The Treasury Department is out with a study saying most of the people who'd pay the millionaire's tax are actually investment fund managers or wealthy lawyers, other rich people. Only about 14 percent are the kinds of small-business owners who we might think of as job creators.

SIMON: Of course, this whole debate comes at a time when the economic recovery, as we just heard from John Ydstie, is still fragile.

HORSLEY: Yeah. The White House has said that the tax cut this year helped to provide some protection against heavy head winds, and they're saying that to extend the tax cut would be an insurance policy against additional economic blows in the year to come. The jobs numbers we got yesterday, they were OK but not great, and the president says he's determined to see this tax cut extended.

PRESIDENT BARACK OBAMA: Now is not the time to slam the brakes on the recovery. Right now, it's time to step on the gas. We need to get this done, and I expect that it's going to get done before Congress leaves. Otherwise, Congress may not be leaving, and we can all spend Christmas here together.

SIMON: Now, Tam, pretty as the White House Christmas tree might be, lawmakers must be eager to be back home not only with their family, but among voting constituents coming into an election year.

KEITH: Absolutely. They do not want to have to stay here right through Christmas - though it's not clear exactly how we're going to get everything done that members of Congress say needs to get done before the holidays. There's definitely talk, behind the scenes, of coming up with some sort of bipartisan solution. But remember, it's not just the payroll tax cut. It's unemployment insurance, it's actually funding the government beyond December 16th, the doc fix for Medicare, a number of other little tax adjustments. There's a whole lot to do here in not very much time.

SIMON: And does the increasing velocity of the presidential election promote a spirit of reconciliation and compromise?

(SOUNDBITE OF LAUGHTER)

HORSLEY: Hardly. But I do think, you know, even though a big part of the president's re-election campaign message is to run against a do-nothing Congress, I think this is a case where he really does want Congress to do something, and make some kind of deal to extend this tax cut.

KEITH: And I'll say that here at the capital, the rhetoric is coming from the Democrats that Republican are just trying to do nothing so that the president will look bad, the economy will crash, and the president won't get re-elected. And then Republicans say, well, Democrats are just designing bills to fail so that the president can campaign against that do-nothing Congress. And it goes on and on and on, every day.

SIMON: NPR's Tamara Keith and Scott Horsley. Thank you both very much.